New ITPI Report: Privatization Triggers “Alarming Race to the Bottom” for Middle Class, Community Services

Washington, DC – In the Public Interest (ITPI), a comprehensive resource center on outsourcing and responsible contracting, today released a new report titled “Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class.” The report was released in a telebriefing this afternoon. Jared Bernstein, Former Chief Economic Advisor to Vice President Joe Biden, joined outsourcing experts on the call to discuss the report, along with privatization experts and a public service worker who lost her job to privatization.
The report includes case studies from across the country in which the false promises of privatization have triggered an “alarming race to the bottom,” as far-away corporate executives benefit from lucrative government contracts while local communities suffer the consequences of lower quality services andmiddle class careers being replaced with poverty-level jobs – all inadvertently funded by local taxpayers:
  • In New Jersey, food service workers had their wages cut by $4-6/hour and many of their health insurance benefits wiped out when their jobs were outsourced to companies like Aramark, Sodexo and Compass. Food service companies have among the highest levels of employees and their children enrolled in the New Jersey FamilyCare program – driving up poverty and likely costing taxpayers far more than any savings realized from privatization.
  • In Michigan, nursing assistant jobs at a veterans home went from a $15-20 hourly wage with health benefits to a starting wage of $8.50 per hour with no benefits after the jobs were outsourced. Studies show the cuts resulted in higher turnover among the outsourced nursing assistants, and ultimately, lower levels of reliability and quality of care for veterans.
  • In Milwaukee, the county outsourced nearly 90 custodial jobs to MidAmerican Building Services, a for-profit company that slashed compensation so much that many county workers with families could no longer afford to work there. One custodian skipped doctor visits tosave money and had to dip into her son’s college fund to pay for daily necessities. Another custodian was forced to cut back on treatments needed by his disabled son due to the loss of income.
Key quotes regarding the ITPI study:
“False promises of privatization have triggered an alarming race to the bottom, as far-away corporate executives benefit from lucrative government contracts while local communities suffer the consequences of lower quality services and middles class jobs being preplaced with poverty level wages. And by the way, local taxpayers inadvertently fund all of this.”
  • Donald Cohen, Executive Director of In the Public Interest
“Right now Americans are engaged in a conversation about income and wealth inequality. Not since the gilded age has the gap between the super-rich and everyone else been so wide. In theory, privatization is a great deal for taxpayers because it saves a few bucks in the town budget. In reality, taxpayers are funding the downward spiral of their own communities – and often paying far greater costs in the long run.”
– Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities and Former Chief Economic Advisor to Vice President Joe Biden
“The degradation of formerly family-supporting jobs through government outsourcing turns middle class careers into poverty-level jobs. Governments across the country are using our public dollars to fuel the low-wage economy and increasing economic inequality.”
“Contracting out public services means fewer opportunities for middle-class jobs and less upward mobility, higher wage gaps between men and women and blacks and whites and more workers and retirees on public assistance, especially in female-headed households.”
  • Daphne Greenwood, Professor of Economics, University of Colorado, Colorado Springs
“Privatization has had a devastating effect on our community. Not just in terms of what we get paid, but we also aren’t spending money at local businesses for even the most basic necessities like medication and housing. This has just been awful for us and I hope any community would think about our story before looking to privatization.”
  • Mary Sparrow, former Milwaukee County custodial worker laid off after privatization.
Donald Cohen and Shar Habibi are available to discuss the findings of the report.
The entire report can be downloaded here.